Lesson 5: Rates and fees, prices as signals

The idea: prices as signals. Sowell's Basic Economics is built around how prices work. A price tells people what something costs to provide, and it influences how much of it they use Unverified1. A city rate is a price, set by a vote instead of by a market. So you can ask what the rate tells people, and who it asks to cover the cost.

The numbers

The city's "New rates 2026" exhibits set the schedule. For a home with a small (5/8 to 3/4 inch) meter Verified2:

From Dec 2024 to Feb 2030, the two fixed charges rise $67.31 a month, or 57%. The water fixed charge and the water per-hcf rate each rise about 157%. The sewer rates each rise about 30% Calculated2. The base charges include up to 5 hcf of water a month. The per-hcf rates apply above that Verified2.

What the price tells people. The fixed charge stays the same no matter how much water you use. The per-hcf charge goes up when you use more. That is the part of the rate that "signals" the cost of the next unit of water. Whether a rate should lean on one or the other is a design choice, and each choice has trade-offs: a fixed charge gives the city steadier income, and a per-use charge gives customers a reason to save. We list this as a way to think, not as a finding about Williams.

How the decision was made

Water and sewer charges are property-related fees under Proposition 218, so they need a public hearing where owners can file written protests Verified3. At the January 21, 2026 hearing, staff reported that 328 written protests had been received, and that a majority protest would need 828 valid protests. Staff said that even if all 328 were valid, the total was well below 828. The Council then adopted Resolution 26-01, 5-0 Verified3.

Staff said the increases were needed because of insufficient revenues to fund ongoing operations, rising regulatory costs, and the need for long-term financial stability. Speakers raised affordability, especially for low-income households and farmworker families Verified3. The FY2026 budget showed the water fund taking in $1,225,441 and spending $1,318,378 Verified4.

Our reading (not a verdict): A price below the cost of a service gives one signal, and a price that covers it gives another. Either way, someone bears the cost: the customers, the taxpayers, or a later year. The lesson is to ask which one.

Try it

1. What does this rate tell a customer about the cost of the next unit?
2. Who pays if the rate does not cover the cost?
3. Is the increase one step or a five-year schedule? (Here it is a schedule through Feb 2030.)

More: fees and rates tracker, Proposition 218.

← Lesson 4 · Next: Lesson 6, per household or per person? →

Sources cited on this page

1. Basic Economics: A Common Sense Guide to the Economy (5th ed., 2014; first edition 2000), Thomas Sowell (Basic Books; unofficial / third-party; accessed 2026-11-09) Publisher's catalog page. We rely on the publisher's description (it says the book shows how to critique economic policies by the incentives they create rather than the goals they proclaim). We have not checked page text and quote nothing from the book. ↗
2. Water and sewer rates, scheduled increases (Exhibits A and B, "New rates 2026") (City of Williams; official; accessed 2026-10-23) Monthly fixed and volume rates in effect since December 1, 2024, and the increases scheduled every February 1 from 2026 to 2030. Text layer. ↗
3. City Council agenda packet, February 18, 2026 (City of Williams; official; accessed 2026-10-23) Holds the January 21, 2026 minutes (Resolutions 26-01 and 26-02). Scanned; read with OCR. ↗
4. Two-year budget, FY2026 and FY2027 ("submitted 7.16.25") (City of Williams; official; accessed 2026-10-23) Scanned and partly sideways. Figures used here come from Exhibit A (PDF page 7, titled "City-Wide Fund Summary and Preliminary Operating Budgets"), Exhibit D (PDF page 11) and the department pages (PDF pages 13 to 26, headed "Proposed"), read by eye. The department totals add up to the Exhibit A totals. ↗